31 March, 2016
1. Litigation
Legal advice privilege only covers advice from lawyers, says the Court of Appeal
In the case of Super Worth International Ltd & Ors v Commissioner of the ICAC & another (CACV 168/2015), the Hong Kong Court of Appeal (the “Court”) adopted the UK Supreme Court’s reasoning in R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another [2013] UKSC 1, and held that legal advice privilege, a limb of legal professional privilege (“LPP”), does not extend to legal advice given by non-lawyers such as accountants. The Court also considered conflict of laws issues that arise in the privilege context, and the scope of the crime/fraud exception to LPP.
This case demonstrates that Hong Kong law on LPP relating to legal advice given by non-lawyers mirrors the English position. The decision also highlights LPP’s roots in the public interest and the rule of law, and as such, acknowledges that the legislature is better-placed than the courts in attempting to define its scope. Click here to read the full post including the salient take away points.
Court of Appeal sets out guidelines for ‘fraud exception’ in summary judgment applications in Hong Kong
In Zimmer Sweden AB v. KPN Hong Kong Ltd and another (CACV 172/2015), the Court of Appeal relied on the long standing approach in Hong Kong in interpreting the “fraud exception” to a summary judgment application under Order 14 rule 1(2)(b) of the Rules of the High Court. The Court of Appeal held that the ‘fraud exception’ is interpreted widely in Hong Kong and, accordingly, the courts will refuse to consider an application for summary judgment where the action includes a claim based on an allegation of fraud even though there is no express claim for damages for fraud. In this judgment, the Court of Appeal helpfully set out guidelines for the courts to consider when evaluating whether or not a case falls within the “fraud exception”. Also, interestingly, Hon Lam VP commented that the fraud exception perhaps no longer sits well with the modern litigation landscape in Hong Kong and that the appropriateness of keeping this exception as part of the Hong Kong rules ought to be reviewed.
Use of predictive coding for e-discovery
A decision of the English High Court handed down on 16 February 2016 has expressly approved the use of predictive coding (also known as technology assisted review) for a large disclosure exercise: Pyrrho Investments Limited & Anr v MWB Property Limited and Others [2016] EWHC 256 (Ch). Based on the US’s experience, this case will likely mark a turning point for the use of predictive coding in England and Wales, and will be highly persuasive in similar cases in Hong Kong. As noted in Master Matthews’s decision, predictive coding has been used relatively infrequently in English litigation. However, Herbert Smith Freehills is among a small number of firms that have already employed the technology in large-scale disclosure exercises in England. While judicial endorsement is not a pre-requisite for a party’s use of predictive coding software, Master Matthews’s decision is welcome in confirming the benefits of the technology in appropriate cases in England and Wales.
In Hong Kong, we are still in the early stages of development. There is currently a pilot scheme, documented as Practice Direction SL 1.2, in place since 1 September 2014 for the discovery and provision of electronically stored documents and this pilot scheme is limited to cases on the commercial list. Practice Direction SL 1.2 is largely based on Practice Direction 31B under CPR Part 31 with a few modifications from Australia and Singapore’s practice. Since Hong Kong’s Practice Direction SL 1.2 is largely based on the UK model, Master Matthews’s decision is important and one which practitioners and companies should take note in Hong Kong. Click here to read the full post including the salient take away points.
2. Anti-corruption
Property tycoon and former Chief Secretary lose appeal in Hong Kong’s highest-profile corruption case
Hong Kong property tycoon Thomas Kwok and ex-deputy leader Rafael Hui saw their appeals against conviction and sentence dismissed before the Hong Kong Court of Appeal. In a detailed judgment, the Court of Appeal unanimously rejected the appeals brought by Kwok, Hui and two others. The judgment confirms the well-established principle that benefits offered to develop or retain goodwill may also fall foul of Hong Kong’s bribery laws. On 22 March this week, Thomas Kwok and Rafael Hui were given permission to appeal to Hong Kong’s Court of Final Appeal. The permission has been granted in light of public interest and the legal issues involved.
Hui is the highest-ranking official in Hong Kong’s history to be found guilty of taking bribes. He was convicted in late 2014 of misconduct in public office and conspiracy and jailed for seven and a half years. Kwok was found guilty of conspiracy to commit misconduct in public office (ie, bribing an official) and sentenced to five years. Francis Kwan and Thomas Chan were sentenced to five and six years respectively for acting as middlemen for the payments. For further details on the trial court’s conviction and sentencing in December 2014,
3. Private Wealth
Where’s Wally – what happens when a trustee cannot locate the beneficiaries?
In Wah Ying Cheong Co Ltd v Chan Kwok Ping & Ors [2015] HCMP 3059C/1997, the Court held that where a trustee is unable to locate beneficiaries under a trust, the Court may order payment of trust monies into Court pursuant to s62 of the Trustee Ordinance (the “TO”). This case serves as a reminder to trustees that s62 TO can provide a practical solution where beneficiaries cannot be found and trustees wish to discharge their duties under the trust. Click here to read the full post and the salient take away points.
Hong Kong Court refused to make a grant of administration ad colligenda bona for lack of special circumstances and special justification
In Re Oung Chi Lian Fang (HCMP2347/2015), the Hong Kong High Court refused an ex parte application for a grant of administration ad colligenda bona under s.36 of the Probate and Administration Ordinance.
Ad colligenda bona grants of administration can be useful in situations that call for urgent administration where the facts or details necessary to allow a full grant cannot be immediately ascertained. The Hong Kong High Court treats applications for ad colligenda bona grants with caution. Especially when the grant is disputed, ad colligenda bonagrants will only be made in special circumstances and with special justification. Click here to read the full post and the salient take away points.
4. Arbitration
Hong Kong court considers its power to grant injunctions in support of foreign arbitrations; says hybrid clause enforceable
In Top Gains Mineral Macao Commercial Offshore Limited and TL Resources Pte Ltd (HCMP1622/2015), the Hong Kong Court of First Instance has refused to discharge an injunction in support of prospective arbitral proceedings in Singapore, despite the “hybrid” nature of the arbitration clause and the fact that the Singapore court had declined to grant an injunction in the same case. The Court held that both s 21M of the High Court Ordinance and s 45 of the Arbitration Ordinance can apply to injunction applications in aid of foreign arbitral proceedings; there is no substantive difference between the tests under the two statutes. Chan J also held that an award rendered under a clause that provided for arbitration at SIAC under the ICC Rules could be enforced in Hong Kong, so long as it had not been set aside by the courts of the seat.
Hong Kong constitutionality challenge – leave to appeal denied
The Hong Kong Court of Appeal has rejected an application for leave to appeal to the Hong Kong Court of Final Appeal from its previous judgment that upholds the constitutionality of s.81(4) of the Arbitration Ordinance (Cap. 609), under which a party who wishes to appeal a Court of First Instance (CFI) decision on setting aside an arbitral award must obtain leave to appeal from the CFI. This judgment confirms the limited rights of appeal in arbitration cases and the constitutionality of the relevant provisions. Click here to read the full post including the implications of this case.
5. Insolvency
Hong Kong Court of First Instance clarifies test for adding debts accrued after presentation of a creditors’ winding up petition
In Re Hin-Pro International Logistics Limited HCCW 226/2014, the Hong Kong Court of First Instance held that it has jurisdiction to grant leave to amend a creditor’s winding up petition to include debts accrued only after its presentation. The Court adopted the relevant legal test set out in Re Richbell Strategic Holdings Limited [1997] 2 BCLC 429 and rejected the more stringent Eshelby Rule test which still applies to amendments of a writ. This is welcome news for creditors faced with additional debts, which often add up to a substantially higher sum than the original debt and, which often accrue only after the presentation of a winding up petition. Click here to read the full post including the implications of the decision.
Transactions at undervalue and unfair preferences – how will the Court interpret s49 and s50 of the Bankruptcy Ordinance?
In Wong Tak Man, Stephen & Another v Cheung Siu Fai & Ors [2015] HMP 1431/2012, the Court held that transfers of funds made by a bankrupt were not transactions at undervalue or unfair preferences pursuant to s49 and s50 of the Bankruptcy Ordinance (the “BO”). This case serves as a useful reminder on how the Court will interpret s49 and s50 BO, as deemed to be applied in a corporate context by s.266B(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32). In essence, the Court will follow the matrix of the statute to apply each criteria to the facts systematically. Practitioners should also note the requirement to prove that the bankrupt was insolvent or became insolvent as a result of the transaction or preference. This case demonstrates that this can be difficult to prove and may require expert evidence, adding to the costs of the litigation.
Hong Kong’s top court finds delay in commencement of bankruptcy period unconstitutional
In the recent case of Official Receiver v Zhi Charles (FACV 8/2015) (5 November 2015), the Court of Final Appeal found s 30A(10)(a) of the Bankruptcy Ordinance (Cap 6) unconstitutional. Where a bankrupt is not in Hong Kong when he is adjudged bankrupt, this section operates to delay the commencement of the bankruptcy until the bankrupt returns to Hong Kong and notifies the trustee of his return. Click here to read the full post including the salient take away points.
6. Employment
Impact of CJEU decision in Schrems v DPC on the implementation of cross-border data transfer provisions in Hong Kong
Organisations in the European Union with operations in the United States have, for over a decade now, taken comfort that the transfer of personal data to the United States would be lawful if the recipient had subscribed to the US Safe Harbour Scheme. According to the European Commission Decision 2000/520, the operation of the Scheme meant that personal data transferred to the United States would be afforded an adequate level of protection (that is, an EU-standard level of protection). That is no longer the case. In the recent case of Schrems v DPC, the Court of Justice of the European Union (the “CJEU”) ruled that the US Safe Harbour Scheme does not provide an equivalent standard of protection for personal data, because data recipients are required to disregard the Safe Harbour Principles where they conflict with national security, public interest or law enforcement requirements of the United States.
This case is of interest in Hong Kong, because of recent indications that the Hong Kong Government may take steps to bring section 33 of the Personal Data (Privacy) Ordinance into effect. Section 33, once it becomes operative, will prohibit the transfer of personal data out of Hong Kong, unless an exception applies.
For further information, please contact:
Gareth Thomas, Partner, Herbert Smith Freehills
gareth.thomas@hsf.com
